During the hustle and bustle of the holiday season, it is important to remember to spend some time preparing for the upcoming year as 2024 winds down. From strategic gift-giving to consulting with your accountant about year-end tax planning, taking necessary retirement account distributions, and ensuring your estate planning documents are properly executed and your Trust funded, now is the time to review the status of these estate and financial matters. Here are five things you can do during December to ensure you are protecting your assets and providing peace of mind for you and your loved ones as we enter 2025.

1. Make Gifts to Family Members.  

Every individual may gift up to a certain amount to one or more individuals within a calendar year without the giver or the recipient having to report it to the Internal Revenue Service (IRS).  This is called the “annual gift tax exclusion” and for 2024, the amount is $18,000.  The annual gift tax exclusion amount increases to $19,000 for 2025.  For example, let’s say Jane wants to give her daughter Anne $18,000 for Christmas.  Jane also wants to give her son Alex $18,000.  Jane can do this so long as the total gift amount given to each child is $18,000 or less from January 1, 2024 through December 31, 2024. If Jane is married, she and her spouse may each gift the annual gift tax exclusion amount, meaning Jane and her spouse can gift a total of $36,000 to each Anne and Alex during 2024 (which is known as gift splitting).

However, if Jane alone gave Anne $10,000 at the beginning of 2024 and wants to give Anne another $18,000 in December, Jane will have given Anne a total of $28,000 in 2024 which is over the annual gift tax exclusion amount of $18,000.  Gifts over the annual gift tax exclusion to any one person require the filing of a federal gift tax return.  In Jane’s case, she would file a federal gift tax return with the IRS reporting a $10,000 gift ($28,000-$18,000 = $10,000).  It is vital to note that neither Jane nor Anne pays any federal taxes on the amount over the annual gift tax exclusion amount.  This is because Jane has a certain amount that she can gift to individuals over the course of her lifetime (which is tracked by filing the federal gift tax return) before taxes must be paid. This is called the “lifetime exemption” amount, which is $13.61 million for 2024, and includes both lifetime gifts and gifts given at death.  For 2025, the lifetime exemption amount will be $13.99 million per individual.  

Giving gifts can be a way to spread cheer to the gift recipients while at the same time reducing the value of your estate which will save your heirs estate tax following your death.  When making gifts it is important to consider the assets you should retain to pay your own expenses and any care that may be needed in the future.  Consult with your estate planning attorney and/or tax preparer to see if gift-giving is a tax savings strategy you should consider in light of your future needs.

2. Consult With an Accountant. 

If you have an ownership interest in a small business or commercial property, consult with an accountant regarding end of year income tax planning. Additionally, you may want to check in with your accountant if your ownership interest is held in an LLC, corporation, or other applicable entity because you may need to file a Beneficial Ownership Information (BOI) report with the U.S. Treasury Financial Crimes Enforcement Network (FinCEN) before January 1, 2025, to comply with the regulations of the Corporate Transparency Act that passed at the beginning of this year.

3. Retirement Accounts: Take Your Required Minimum Distribution and/or Confirm Your Designated Beneficiaries. 

If you have reached the age where you must take Required Minimum Distributions (RMDs) from your retirement accounts (IRAs, 401(k)s, etc.), you generally must withdraw the RMD before the end of the year.  If you do not take your RMD by the end of the year, you may face paying an excise tax on the amount you were required to distribute but did not.  

Whether or not you must take RMDs, it is worth spending a few minutes to confirm you have properly designated primary beneficiaries and contingent (back-up) beneficiaries on your retirement accounts. This can typically be easily accomplished by accessing your retirement accounts online and reviewing your designated beneficiaries or asking the financial institution where your retirement accounts are held to send you written confirmation of the beneficiaries on your accounts. 

4. Execute Your Estate Plan Documents and Complete Your Trust Funding. 

If you plan on traveling for the holidays and/or the winter months, sign your new or updated estate plan documents now so that you have the peace of mind knowing you and your loved ones will be cared for should something happen during your travels. If you created a Revocable Living Trust as part of your estate plan, complete your trust funding.  Trust funding is the process of retitling certain assets into the name of your Revocable Living Trust.  It also often includes confirming the beneficiary designations on your retirement accounts and life insurance policies.  If you did not receive written instructions from your attorney about funding your trust, or have not completed your trust funding, now is a good time to do so.

5. Update Your “Support Team” Contact Information and Password List. 

If you do not already have a list, create a document identifying the individuals you have named in your estate plan documents (health care agent, attorney-in-fact, Personal Representative, Trustee, Guardian, Conservator), your lawyer(s), financial planner and accountant, along with their contact information.  If you already have such a list, review it to confirm all the information is still accurate.  This list will be invaluable to your loved ones should something suddenly happen to you.

Create or update a list of all the digital devices (Smartphone, laptop, etc.) you own and online accounts (Facebook, Instagram, bank accounts, investment accounts, retirement accounts, etc.) that you access online. Make sure the list is in a safe place (physically and/or electronically) and that a trusted individual knows where (and how) to locate it. It will be critical for your attorney-in-fact, Personal Representative and Trustee to have access to this information to monitor the accounts for fraudulent activity, close the accounts, consolidate the accounts, and take other necessary actions.

Making end-of-year financial and estate planning decisions is essential for protecting your assets and loved ones. Whether through utilizing the annual gift tax exclusion amount of $18,000, consulting with your accountant about tax planning, taking required retirement account distributions, or completing your estate plan documents and trust funding, there are several actions you can take to ensure your affairs are in order before year-end. At Samuel, Sayward & Baler LLC, we can help you determine and implement these important year-end planning steps to ensure you are prepared for the coming year.

 

 

 

 

Our office is closed on 11/28 and 11/29.

One of the first things I want to know when I meet a new estate planning client is: What are your planning goals? What are you trying to accomplish by seeing me? Depending on their circumstances, clients may want to avoid probate, save estate taxes when they die, make sure their assets will be protected if they require long-term care at the end of their life, or all of the above. But one goal I hear most often from clients is the desire to make things easier for their loved ones after they pass away.

Many of our clients have experienced the death of a spouse or a parent and understand the work involved in wrapping up someone’s affairs after their death. That experience can be markedly different – in a good way – if the person has planned properly and taken steps to be sure everything is in order. If that is the case, significant time, expense and aggravation can be saved.

As we begin to anticipate the Thanksgiving holiday with our family and friends, here are five things those you leave behind will be thankful you did before you get sick or pass away.

1. Make sure your Power of Attorney is Up to Date

Your power of attorney is the unsung hero of your estate plan. A Power of Attorney appoints someone (an “attorney-in-fact”) to make legal and financial decisions for you if you are unable to make those decisions yourself at some point during your lifetime. A Power of Attorney must specifically list the actions you authorize your attorney-in-fact to take on your behalf.

Many people will suffer a period of incapacity prior to death. It is during this time that a well drafted Power of Attorney is crucial. A Power of Attorney drafted 10 or 20 years ago may not be honored by banks or other financial institutions your attorney-in-fact needs to deal with to be able to manage your assets and pay your bills. Older Powers of Attorney may not specifically authorize actions your attorney-in-fact may need to take, such as to access your on-line accounts, deal with cryptocurrency, or sell the second home you recently purchased.

An up-to-date Power of Attorney will avoid the need for a Court to appoint a conservator to handle your financial affairs, which is important if you want to avoid a public court proceeding that will take months and be very costly. Identify someone you trust to handle your financial matters and create an updated Power of Attorney with appropriate powers that will allow them to help you when you need it.

2. Create a Comprehensive List of your Assets and Other Important Information

When we work with clients on settling an estate or trust, one of the most frustrating aspects of the process is their inability to locate information about a deceased’s current assets, debts, or benefits. To make this process easier for your family, create a comprehensive list of your assets including real estate, bank accounts, IRAs, 401(k)s, brokerage accounts, life insurance, annuities and any other assets you have or that your family or estate would be entitled to receive at your death. Include account numbers.

If you have valuable personal property – like artwork, or sports collectibles – provide as much information as you can about the provenance of those items, the purchase price (if applicable), and any trusted source for appraisal or sale of the items after death if that is anticipated. If you have cryptocurrency, provide detailed information about how to access those assets. If you have cash or gold stored at home or offsite, provide information about where to find those assets.

As to any bills you pay on a regular basis – monthly, quarterly, annually – describe from what account each bill is paid if paid automatically. Provide the names of the financial institutions and account numbers for mortgages and car loans.

Include the name and contact information of your attorney, your accountant or tax preparer, your insurance agent and your financial advisor, if any.

In addition to asset information, think about other information that would be useful for your family to have if you were suddenly unavailable, such as:

•  A list of employers from whom you receive, or from whom your beneficiaries may be entitled to receive, pension or other group benefits;
• Information regarding your health insurer, including any Medicare supplement and long-term care insurance policies;
•  A list of your active credit cards, along with any rewards programs;
• Access information for safe deposit boxes or storage facilities;
•  A list of your online accounts, usernames and passwords (more on this below); and,
•  Home alarm codes and contact information for the alarm company.

This is not an exhaustive list but is intended to help you start thinking about what your family would need to know. Pay attention to the tasks you handle for your household and ask yourself, what would someone need to do this?

Make sure a trusted person knows where to locate the list after it is created. And finally, review this list every six months or so and keep it updated.

3. Keep an Updated List of Your Usernames and Passwords

More and more of our life is lived online these days. It is important to leave instructions for those who may need them to access important information that is only accessible online. For example, you may pay all of your bills online or receive account statements via email, you may have online savings accounts that do not exist in a brick and mortar bank, you may have cryptocurrency, or photos stored in an online photo storage site you want family members to be able to access after your death. For all of these reasons and many more, create a list of your username and password for those websites and other online accounts that will be important for someone to access after your death. If you store this information in an online password manager, leave the password for that password manager account. Then, keep this list in a safe place that is known to a trusted person or two who can locate the information when needed. And as with the other lists mentioned above – keep this updated as usernames and passwords change and new online accounts are created.

4. Review and Update your Beneficiary Designations.

Many of your most significant assets – life insurance, retirement accounts, annuities – will be paid to a designated beneficiary at your death. Make sure your beneficiaries are designated properly and consistent with your estate plan. Properly designating beneficiaries is more complicated than it may appear. Understanding the implications of certain beneficiary designations is crucial. For example, this can be especially significant in estate planning for a minor or disabled child. A trust for the benefit of a young or disabled beneficiary can be instrumental in avoiding a lengthy and costly court proceeding to appoint a guardian and in avoiding the loss of public benefits a disabled beneficiary may be receiving. Understanding how distributions from retirement accounts work after the death of the account owner, and how different beneficiary designations will impact the size, frequency and income tax payable on those distributions is crucial to making appropriate designations. Work with your estate planning attorney to be sure you understand how your beneficiaries should be designated, and then confirm they are designated in the appropriate way to ensure your estate plan will work as intended.

After your beneficiaries are designated, it is a good idea to confirm those beneficiary designations from time to time. It is not uncommon that when financial advisors move from one company to another, or when employer-sponsored retirement plans change custodians, the beneficiary designation does not carry over. Requesting written verification of your beneficiaries and maintaining that confirmation with your records is also a good idea.

5. Make sure your assets are properly titled in your Trust.

A Trust is an estate planning tool that is used to accomplish many goals including asset management, probate avoidance and estate tax savings. However, simply creating a Trust will not in itself achieve those goals; it is necessary to “fund” the Trust by titling assets in the name of the Trust or designating the Trust as the beneficiary of assets such as life insurance.

Your estate planning attorney should provide you with instructions for funding your Trust consistent with your estate plan. If you have received trust funding instructions but haven’t yet gotten around to doing the work necessary to retitle your assets or designate beneficiaries properly, take the time to do that now. It will make all the difference in achieving those planning goals.

Maria C. Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and the former President of the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.

November 2024
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